26 March 2001.
FINANCE 2001 -
The world's stock markets are bouncing
around like headless chooks.
Not surprising. Stockbrokers
and financial managers are in the process of losing their jobs. Large
scale corporations are dead. Their carcasses will be picked over
by predator corporations that will in turn become the carcasses for smaller
scavengers. It's dog eat dog, devil take the hindmost.
It is the new economy. It
is doing exactly what predictions said it would. It is making everything
cheaper. The reason that things are cheaper is that marketing has
become more efficient. No longer do products require expensive TV
and print media advertising & warehousing. Entrepreneurs make
products and sell them direct. The old megamonopolies will go bust.
The problem is exacerbated by two
The oil price. The excess profits
of the oil producing nations are stored as $US. This produces a huge
inflow of capital to the US.
The baby boomers are retiring for the
next 10 years. The funds for retirement must be invested in
shares or real estate to provide income streams. Consequently there
are too many dollars chasing too few products. So the price of the
products will rise, and the quality will fall.
So what is the bottom line? What
will happen to stocks and bonds? (The following analysis is
offered without any guarantees...).
ADVICE: If you are retired
and have capital, you would be best advised to think about a way to return
to the workforce. Do not trust your capital in any single investment,
especially do not hold more than 50% of your capital in shares.
Large scale energy production corporations
will be a good bet for the next 5 - 10 years. That is about how long
it will take to develop photoelectric energy production as a competitor
to thermal power.
Utilities delivery (power, communications,
gas & water reticulation systems) will be a safe investment, but they
may become too greedy, and so attract legislation limiting their monopoly
Banks and financial services (personal
loans, transactions and cash) will be a growth industry.
Corporate financial services, insurance
and investment corporations are pure poison.
Mining and primary production will
remain stable, with the best investments being small efficient corporations.
Large infrastructure mining corporations will no longer retain their traditional
economies of scale.
Large chemical corporations will diminish
in size as the economies of scale produce smaller, more efficient competitors.
Transport will be a huge growth area,
with the caveat that growth will not be via large capital businesses, but
Digital entertainment monopolies will
lose out to napsters, printing industries will disintegrate as authors
Real estate will cease to improve in
value and eventually go backwards as governments increase taxes on this
last taxable resource.
Health care will offer incredible growth,
especially pharmaceuticals & Biotech.
Education will also be a strong growth
area, especially Information Technology.
Try to develop your own new age
As a corollary, the old economy
will fight back. For instance Rupert Murdoch is steering NEWS Corp.
in the direction of the Chinese in an effort to find new markets to sustain
his wealth. The Chinese dictators (like the Russians before them)
are deploying to fight the battles of the last (economic) war, the war
of big corporations and elitist capitalists. The corrupt but democratic
Indians are showing a genius for fighting on the new battlefield, where
small, flexible manufacturing units will fill niche markets and destroy
the dinosaur megamonopolies. The next big challenge to the USA democracy
(following it's survival of Japan and the Clinton family) will be India.
Set up a web site and sell a product.
Setting up a web site is quite inexpensive, and does not require high technical
skill. Price and delivery is what sells goods, not Hi-Tech sites.
Probably before you retired you knew
a product. Sell that product. Quite likely you will find a
way to undercut your ex-employer. If you do not, someone else will.
You do not need to make a large profit.
Being retired you can operate as a marginal enterprise for years.
During that time you will become expert in the new economy.